The past 15 months have been tough for shareholders of International Distributions Services (LSE: IDS). Formerly known as Royal Mail Group, the 517-year-old business struggled with a wave of strikes last year. As a result, the IDS share price has plunged from previous highs.
The share price slumps
In October 2022, the venerable universal postal service provider changed its name to International Distributions Services. This was done to reflect the increasingly international nature of its business, but upset some postal workers.
Being a well-known household name didn’t protect IDS shares from crashing from their former highs. At the end of 2021, this widely held stock closed at 506p. Here’s how it has performed over seven different time periods:
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| Current price | 223.2p |
| One day | +1.1% |
| Five days | -6.7% |
| One month | -3.9% |
| Six months | -10.7% |
| One year | -38.6% |
| Five years | -56.7% |
As well as dipping over 10% in the past six months, IDS shares have dived by almost 39% over 12 months. Even worse, they’ve lost close to 57% of their value in half a decade.
Just over a year ago, on 17 March 2022, the IDS share price hit its 52-week high of 173.65p. By 14 October, it had slumped to its 52-week low of 173.65p. Ouch.
At its all-time high in May 2018, Royal Mail’s market value was close to three times its present level of £2.1bn. Once a proud member of the elite FTSE 100 index, sustained share-price falls relegated it to the mid-cap FTSE 250, where it remains today.
Will there be a rebound?
For the record, my wife bought IDS shares in June 2022 for 273.2p per share. To date, we are sitting on a paper loss of 18.3%. Hmm.
When I look at the fundamentals of the shares, they appear cheap at first glance. They trade on a price-to-earnings ratio of 8.7 and an earnings yield of 11.5%. Also, the chunky dividend yield of 7.5% a year is apparently covered 1.5 times by earnings.
Unfortunately, these are trailing figures. In fact, IDS is losing money hand over fist, driven by losses of £200m at Royal Mail due to 18 days of staff walkouts. In January, the group warned that it could lose between £350m and £450m in the latest financial year.
What’s more, December deliveries suffered following a cyber-attack that shut down its ability to deliver overseas. Again, this is hardly good news for long-suffering IDS shareholders.
So when might the group turn this tanker around and return to profitability? In my view, IDS shares will tread water until the company and its workers reach a compromise agreement to end industrial action. And the more the strikes go on, the more the business will lose.
In short, though GDS — its international delivery arm — is doing great, the group is being dragged down by Royal Mail. Hence, I fully expect it to reduce its dividend payout this year to conserve cash.
Despite this gloomy outlook, I expect the share price to bounce back in late 2023 or 2024. And that’s why my wife and I will hang onto our stock for recovery and a rebound!
